Fed Beige Book Feb 2026: Modest Growth | Economician

Overall Economic Activity

Overall economic activity increased at a slight to moderate pace in seven of the twelve Federal Reserve Districts, while the number of Districts reporting flat or declining activity increased from four in the prior period to five in the current period. Although consumer spending increased slightly on balance, two Districts reported ongoing declines, and many noted that sales were dampened by economic uncertainty, increased price sensitivity, and lower-income consumers pulling back on spending. Districts impacted by winter storms said that retail traffic generally slowed, and one District said immigration enforcement activity negatively affected customer demand in urban areas. Auto sales were mostly down for Districts that reported on them, with many citing continuing affordability issues. Manufacturing activity improved overall since the previous reporting period, with eight Districts reporting varying degrees of growth and two reporting declines. Manufacturing contacts in many Districts reported increases in new orders, and several cited boosts in demand from data centers and, relatedly, energy infrastructure. Transportation activity was mixed across Districts that reported on it, with three reporting contractions and two reporting modest growth. Overall, financial services activity was reported as stable to up, with commercial lending being the primary area of strength. For most Districts that reported on residential real estate and construction, sales and activity decreased slightly, with low inventories and affordability remaining key issues. Nonresidential construction activity was mixed across reporting Districts but increased slightly on net. Among reporting Districts, agricultural conditions were mostly flat, and energy activity grew modestly on balance. Overall, economic expectations were optimistic, with most Districts expecting slight to moderate growth in the coming months.

Labor Markets

Employment levels were generally stable in recent weeks as seven of the twelve Districts reported no change in hiring. Contacts in several Districts cited rising nonlabor input costs, softer demand, or uncertainty about overall economic conditions as reasons for flat or lower employment levels. Firms in some Districts and in various sectors looked to AI or other forms of automation to gain efficiencies, with most emphasizing the goal of productivity enhancement rather than worker replacement. Wages rose at a modest or moderate pace in most Districts as firms competed for talent in select areas, including the skilled trades. Several Districts continued to report upward pressure on total compensation due to rising health insurance premiums.

Prices

Prices increased moderately in recent weeks, with eight Districts reporting moderate price growth and four seeing slight or modest increases. Many Districts reported that costs rose across several nonlabor inputs, including insurance, utilities, energy, and metals and other raw materials. Nine Districts mentioned that tariffs contributed to increased costs. Some firms continued to pass tariff-related cost increases through to their customers, and others began to do so after having absorbed previous increases. Still, most Districts received reports of some firms holding selling prices stable despite higher costs because their customers were increasingly price sensitive. On balance, firms expected prices to rise at a somewhat slower pace in the near term.

Highlights by Federal Reserve District

• Boston

Economic activity was flat on balance, as was consumer spending. Employment edged down, and wage growth was slight. Prices rose modestly, as several contacts reported ongoing cost pressures from tariffs, while certain food prices were marked down from previously elevated levels. The outlook improved, but financial pressures on low-income families remained intense.

• New York

Economic activity declined modestly despite a small pickup in manufacturing. Employment remained flat, and wage growth was steady and modest. Selling price increases remained moderate. Consumer spending grew slightly, though uncertainty prompted some consumers to pause major purchases and pull back on spending. Businesses expected conditions to improve somewhat.

• Philadelphia

Economic activity in the Third District grew modestly, up from a slight pace last period. Sales activity grew, despite many contacts noting that activity was hampered by adverse weather. Employment levels again rose modestly. Firms reported that own-price inflation ticked down in the first quarter, while wage inflation remained modest. Contacts continued to report that low-, middle-, and fixed-income households were struggling to pay for necessities.

Cleveland

Fourth District business activity increased modestly in recent weeks, with continued modest growth expected in the months ahead. Manufacturing and commercial construction contacts reported increased demand, with several highlighting data center development as a primary driver of activity. Nonlabor cost pressures remained robust, while selling prices continued to increase moderately.

• Richmond

The regional economy continued to grow modestly in recent weeks. Consumer spending on retail was flat, while spending on travel and tourism increased slightly. Manufacturing and residential real estate activity declined while commercial real estate activity increased moderately. Employment increased slightly. Prices continued to grow at a moderate year-over-year rate.

Atlanta

Economic activity expanded at a modest to moderate pace. Employment was flat to down somewhat; wages grew modestly. Prices were flat to slightly up. Consumer spending and tourism increased. Housing demand improved, but commercial real estate slowed. Transportation demand was flat to slightly down, while manufacturing was up slightly. Energy activity grew moderately.

• Chicago

Economic activity increased slightly. Manufacturing demand rose modestly; consumer spending and construction and real estate activity rose slightly; employment and business spending were flat; and nonbusiness contacts saw no change in activity. Prices and wages rose moderately, and financial conditions loosened. Farm income in 2026 was expected to be similar to 2025.

• St. Louis

Economic activity has remained unchanged since our previous report, but is expected to increase over the next few months. Employment levels were unchanged. Wages and prices continued to increase moderately. The outlook among contacts has improved to be cautiously optimistic.

• Minneapolis

District economic activity fell slightly. Employment softened while labor demand was little changed. Wage growth was moderate, and prices ticked up modestly. Consumer spending fell. Manufacturing decreased moderately. Construction activity was moderately lower,r with larger declines in nonresidential building. Agricultural conditions remained largely unchanged at weak levels.

• Kansas City

Economic activity in the Tenth District increased slightly over the reporting period. Labor conditions remained steady, with firms utilizing technology and workflow improvements to ease operational constraints. Prices have increased slightly. Energy activity increased modestly as higher oil and natural gas prices supported additional drilling activity.

• Dallas

Economic activity in the Eleventh District expanded moderately over the reporting period, vigorously in manufacturing and modestly in services. Bank lending, retail sales, and commercial real estate transactions grew. Energy sector activity declined, and agricultural conditions worsened. Employment grew slightly, while wages and prices increased modestly to robustly. Outlooks remained steady despite elevated uncertainty.

• San Francisco

Economic activity contracted slightly over the reporting period. Employment was stable on net, but layoffs were reported in technology services. Prices rose moderately, while wages grew slightly. Activity in retail and services weakened slightly, and contacts described a bifurcated economy. Conditions were stable in manufacturing and agriculture but mixed in real estate.

Breaks down of report

What the report implies for growth, demand, credit, housing, and the near-term macro-outlook.

Economic activity increased at a slight to moderate pace in seven of the twelve Federal Reserve Districts. Compared with the previous report, the number of districts reporting flat or declining activity rose from four to five, indicating that growth remains uneven. Consumer spending was up slightly on balance, but two districts reported ongoing declines and many contacts noted that spending was dampened by economic uncertainty, heightened price sensitivity and lower‑income consumers pulling back. Winter storms slowed retail traffic and at least one district cited immigration enforcement reducing customer demand in urban areas.

Manufacturing activity improved overall since the previous report, with eight districts reporting some growth and two reporting declines. New orders increased in many districts, and several noted a boost in demand from data centers and energy‑infrastructure projects. Transportation activity was mixed: three districts reported contractions while two saw modest growth. Financial services activity was stable to up, with commercial lending cited as the primary area of strength. Agricultural conditions were mostly flat, whereas energy activity grew modestly.

Labor markets and prices

Labor markets were relatively stable. Seven of the twelve districts reported no change in hiring, while contacts in several districts attributed flat or lower employment to rising non‑labour input costs, softer demand or broader economic uncertainty. Many firms adopted automation technologies (including AI) to improve productivity rather than replace workers. Wage growth was modest to moderate as firms competed for specialized talent.

Prices increased moderately in most districts. Costs rose across non‑labour inputs such as insurance, utilities, energy, metals and other raw materials, and tariffs were widely mentioned as adding to input costs. While some firms passed these higher costs to customers, others held selling prices steady because customers were becoming more price sensitive. Most firms expected prices to rise at a slower pace in the near term.

Real estate and construction

Residential real‑estate activity decreased slightly, with low inventories and affordability concerns remaining the dominant issues. Nonresidential construction was mixed but increased slightly on net. Community‑condition reports indicate that housing affordability continued to strain low‑ and moderate‑income households; tight inventory, steep increases in home prices and rental costs, constrained public‑housing access and rising development costs made new affordable housing projects difficult.

Expectations

Despite pockets of weakness, the tone of expectations was optimistic. Most districts expected slight to moderate growth in coming months. The Appleton Partners February 2026 outlook noted that the Beige Book indicated economic activity had broadened and strengthened compared with previous surveys, supporting the view that the economy was gaining momentum as inflation pressures moderated.

Breakdown by Key Themes

Growth

The Beige Book shows that U.S. growth remains modest and uneven. Seven districts reported slight‑to‑moderate growth while five saw flat or declining activity. Manufacturing was a notable bright spot: eight districts saw growth, fuelled by increases in new orders and demand from data‑centre and energy‑infrastructure projects. Energy activity also grew modestly. This suggests that capital‑intensive industries are benefiting from investment in digital infrastructure and the energy transition.

On the other hand, growth was held back by consumer caution and weather disruptions. Retail spending was adversely affected by winter storms and immigration enforcement actions. Auto sales fell in most reporting districts because of ongoing affordability issues. Across districts there were reports of businesses delaying investment due to uncertainty. Consequently, while the economy is expanding, growth remains concentrated in certain sectors and regions rather than broad‑based.

Demand and Consumer Spending

Consumer demand improved slightly but remained fragile. Contacts reported that sales were dampened by economic uncertainty, increased price sensitivity and lower‑income consumers pulling back on spending. Winter storms reduced retail foot traffic and immigration enforcement decreased urban demand. In the community‑conditions survey, low‑ and moderate‑income households faced high costs of food, rent and energy, causing increased reliance on food pantries and straining budgets. Nonprofits noted that clients’ financial stress worsened; some households stopped paying bills, skipped meals or delayed medical care due to elevated costs and reduced social‑support services. Many individuals resorted to strategies like selling clothes online, using buy‑now/pay‑later programmes and eliminating dining out.

These anecdotes highlight that while aggregate spending is slightly positive, price sensitivity and household financial stress are constraining demand. The recovery in consumption is therefore dependent on continued wage gains and easing inflation. Tourism and travel spending improved in some districts, indicating that discretionary services demand may be gradually rebounding.

Credit and Financial Services

The Beige Book reported that financial services activity was stable to up, with commercial lending being the primary area of strength. This suggests that businesses continue to borrow for expansion, particularly in sectors experiencing growth such as manufacturing and energy. However, community contacts observed that small businesses are challenged by elevated operating costs and limited access to credit. Elevated costs for insurance and labour have pressured profit margins, and nonprofits noted that demand for social services remained high while funding was limited.

From a macro perspective, the Appleton Partners report interpreted the Beige Book as evidence that the economy had strengthened compared with earlier surveys. Still, it cautioned that inflation data, particularly shelter costs, remains volatile and could influence financial conditions in the months ahead. The report also observed tentative stabilisation in labour markets and concluded that the Federal Reserve would likely remain on hold until more data warranted policy action. Overall, credit conditions appear supportive but there are pockets of stress among smaller firms and nonprofits.

Housing and Real Estate

Residential real estate continues to be a weak spot. Most districts reported slight decreases in home sales and construction activity. Low inventories and affordability issues, driven by high prices and elevated mortgage rates, constrained transactions. Community contacts emphasised that housing affordability strains low‑ and moderate‑income households, with limited public‑housing availability and competition for vouchers. New affordable‑housing projects remain constrained by high development costs, rising insurance and interest expenses, long timelines and complex funding.

Some districts saw slight improvements in housing demand as mortgage rates moderated, yet overall activity was sluggish and builders were cautious about new starts【86804702727896†L1392-L1399】. Nonresidential construction showed mixed trends: demand from data centres and medical offices supported activity in some regions, while office vacancies and soft retail leasing dampened growth. The outlook for housing hinges on continued declines in mortgage rates and improvements in affordability.

Near‑Term Macro Outlook

The February 2026 Beige Book paints a picture of a resilient but uneven U.S. economy. Growth is powered by manufacturing, energy and specific service sectors, while consumer demand and housing remain fragile. Labour markets are stable but not booming; businesses are cautious about hiring and are using automation to raise productivity. Inflation pressures persist in some input costs, yet firms expect price increases to moderate.

Most districts expect slight to moderate growth in the coming months. This optimism is supported by outside analyses: Appleton Partners noted that the Beige Book shows broadened strength compared with previous surveys and observed early signs of labour‑market stabilisation. At the same time, community perspectives highlight persistent financial stress among households and nonprofit organisations. Rising insurance costs and funding challenges threaten rural hospitals and social services, and competition for philanthropic funding has intensified. These vulnerabilities suggest that the recovery remains sensitive to policy changes, weather shocks and the pace of disinflation.

Implications by Theme

• Growth

Modest growth persists, driven by manufacturing (new orders and demand from data centres/energy infrastructure) and modest energy activity. However, only seven of twelve districts reported growth, signalling uneven momentum. Weather disruptions, consumer caution and affordability issues limit broader expansion.

• Demand

Consumer spending is slightly positive but fragile. High costs of necessities and price sensitivity cause lower‑income households to trim purchases. Winter storms and immigration enforcement decreased retail traffic, and community reports show households skipping bills and meals. Improvement in tourism suggests some rebound in discretionary demand.

• Credit

Financial services activity is stable to up, with commercial lending strong. Nonetheless, small businesses face elevated operating costs and limited access to credit. Nonprofits and rural hospitals are under financial pressure due to rising insurance costs and uncertain funding.

• Housing

Residential real‑estate activity declined slightly amid low inventory and affordability constraints. Housing affordability strains low‑income households, and new affordable projects face high costs. Nonresidential construction is mixed but benefits from demand for data centers and medical facilities.

• Macro Outlook

Districts generally expect slight‑to‑moderate growth. Outside analysis suggests economic activity has strengthened compared with earlier surveys and labour markets show early signs of stabilizing. However, household financial stress, health‑care funding issues and elevated input costs pose downside risks.

Conclusion

The February 2026 Beige Book indicates that the U.S. economy continues to expand modestly, with manufacturing, energy, and pockets of services driving growth. Consumer demand, however, is constrained by price sensitivity and pressures on lower‑income households. Financial services and commercial lending remain a source of strength, but small businesses and nonprofits report financing challenges. Housing is a persistent weak spot due to limited supply and affordability constraints. Policymakers and market participants can draw cautious optimism from these findings: the economy is not faltering, but growth remains uneven and reliant on specific sectors. Attention should focus on sustaining wage growth, improving affordability and ensuring that financial stress in low‑income communities does not derail the recovery.

Summary,

The February 2026 Beige Book depicts a U.S. economy growing modestly but unevenly, with seven of twelve Federal Reserve districts reporting slight-to-moderate gains and five showing flat or declining activity. Manufacturing and energy sectors were bright spots—bolstered by new orders and demand from data centres and energy-infrastructure projects—while consumer spending remained fragile, constrained by heightened price sensitivity and financial stress among lower-income households. Residential real estate weakened due to low inventory and affordability concerns, and the labour market stabilised with modest wage growth even as firms turned to automation.

Looking ahead, most districts expect slight-to-moderate growth, reflecting cautious optimism. Yet the report underscores the vulnerability of consumer demand and small businesses; nonprofits reported rising demand for social services and limited access to credit, while rural hospitals face funding strains. The Fed’s policy stance appears steady for now, supported by signs of easing inflation and stabilising labour markets. Overall, the Beige Book signals resilience in select sectors but highlights that broader momentum hinges on improving affordability, sustaining wage gains, and addressing the financial stress facing households and community organizations.